290+ Principles of Insurance Solved MCQs

Chapters

Chapter: Unit 1
1.

Largest Life Insurance Company in India is:

A. The New India Assurance Company Limited
B. Life Insurance Corporation of India (LIC)
C. United India Insurance Company Limited
D. National Insurance Company Limited
Answer» B. Life Insurance Corporation of India (LIC)
2.

The term risk may be defined as:

A. The possibility of adverse results flowing from any occurrence.
B. The possibility of an outcome being different from the expected one.
C. Both a and b
D. None of the above
Answer» C. Both a and b
3.

Risk of premature death is a

A. Financial risk
B. Personal risk
C. Dynamic risk
D. Subjective risk
Answer» B. Personal risk
4.

Insurance is a risk management technique involving:

A. Risk retention
B. Risk avoidance
C. Loss control
D. Risk transfer
Answer» D. Risk transfer
5.

Organisations are mainly concerned with managing

A. Pure risks
B. Speculative risks
C. Personal risks
D. None of the above
Answer» A. Pure risks
6.

The first step in risk management process is

A. Risk avoidance
B. Risk identification
C. Insurance
D. Risk evaluation
Answer» D. Risk evaluation
7.

Main emphasis of risk management is on ___________.

A. Risk retention
B. Reduction of cost of handling risk
C. Risk transfer
D. all
Answer» B. Reduction of cost of handling risk
8.

Cost of loss control is

A. cost of reducing frequency and severity of loss
B. cost of paying workers compensation
C. cost of self-insurance
D. all
Answer» A. cost of reducing frequency and severity of loss
9.

Following are the risk management methods:

A. Insurance
B. Hedging
C. Derivatives
D. All of the above
Answer» D. All of the above
10.

Which of the following types of risks best meets the requirements for being insurable by private insurers?

A. Market risks
B. Property risks
C. Financial risks
D. Political risks
Answer» B. Property risks
11.

All of the following are financial risks which may be faced by business organizations EXCEPT

A. Interest rate risk.
B. Commodity price risk.
C. Product liability risk.
D. Currency exchange rate risk.
Answer» C. Product liability risk.
12.

Risk management follows a systematic process which involves……….steps.

A. Two
B. Three
C. Four
D. Five
Answer» D. Five
13.

Risk management information system is not useful in one of the following

A. Reporting
B. Hedging
C. Claim adjustment process review
D. none
Answer» B. Hedging
14.

Event of high frequency and low severity fall in the self-retention category

A. True
B. False
C. none
D. all
Answer» A. True
15.

When as event is stated to be possible, it has a probability between

A. Zero and one
B. Zero or one
C. None of these
D. Both of the above
Answer» A. Zero and one
16.

If the most impossible event is assigned a value of zero, then most inevitable event is assigned a value

A. Of one
B. Between zero and one
C. Between zero to 10
D. Between 10 to 100
Answer» D. Between 10 to 100
17.

Which of the statement are true? A. Risk retention and risk transfer are some of the techniques to manage risks. B. Implementation is one of the steps in risk management

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» C. Both the statements
18.

Which of the statements are true? A. Loss prevention and loss reduction mean different things. B. Risk maybe transferred by contract.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» B. Statement B.
19.

Which of the statements is correct? A. The simplest way to deal with a risk is to avoid it. B. This technique is always possible and practical.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» D. Neither of the statements
20.

Which of the statements is correct?
A. One of the methods of risk retention is by way of voluntary excess or deductible available under the policy.
B. Another method of retention of risk is to absorb small losses as normal operating expenses of business.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» C. Both the statements
21.

When should a risk be avoided?

A. When the risk event has a low probability of occurrence and low impact
B. When the risk event is unacceptable -- generally one with a very high probability of Occurrence and high impact
C. When it can be transferred by purchasing insurance
D. A risk event can never be avoided
Answer» B. When the risk event is unacceptable -- generally one with a very high probability of Occurrence and high impact
22.

Risk management can be defined as the art and science of _________ risk factors throughout the life cycle of a project.

A. Researching, reviewing, and acting on
B. Identifying, analyzing, and responding to
C. Reviewing, monitoring, and managing
D. Identifying, reviewing, and avoiding
Answer» A. Researching, reviewing, and acting on
23.

When a firm buys insurance to cover losses caused by riots, the firm is

A. Transferring risk.
B. Avoiding risk.
C. Assuming risk.
D. Reducing risk.
Answer» A. Transferring risk.
24.

Suppose a project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider __________ as a means of deflecting the risk.

A. Abandoning the project
B. Buying insurance for personal bodily injury
C. Establishing a contingency fund
D. Establishing a management reserve
Answer» B. Buying insurance for personal bodily injury
25.

The cause of loss or a contigency that may cause a loss is known as--------------

A. Hazard
B. peril
C. Risk
D. Uncertainty
Answer» D. Uncertainty
Chapter: Unit 2
26.

Which of the following is the similarity between insurance and gambling:

A. The amount of loss to be paid is known before hand.
B. Promise to pay on the happening of the event
C. Both the parties win on happening of an event.
D. Both are enforceable at law.
Answer» A. The amount of loss to be paid is known before hand.
27.

The business of insurance is related to protection of:

A. savings
B. status
C. profits
D. economic value of assets
Answer» D. economic value of assets
28.

The concept of insurance is

A. to share losses by many
B. to make money out of death
C. to earn interest
D. to earn a status
Answer» A. to share losses by many
29.

Insurance covers the risk of the most certain event -

A. Death of a person
B. protection of the childhood
C. protection of old age
D. all of the above
Answer» B. protection of the childhood
30.

Insurance cover

A. Protects assets
B. prevents loss
C. reduces the impact of loss
D. insures immortality
Answer» C. reduces the impact of loss
31.

The company doing insurance business is called:

A. mutual funds
B. non-banking firm
C. banking company
D. an insurance company
Answer» D. an insurance company
32.

All of the following are disadvantages of using insurance EXCEPT

A. There is an opportunity cost because premiums must be paid in advance.
B. Considerable time and effort must be spent selecting and negotiating coverages.
C. It results in considerable fluctuations in earnings after a loss occurs.
D. Attitudes toward loss control may become lax.
Answer» C. It results in considerable fluctuations in earnings after a loss occurs.
33.

All of the following can be classified as casualty insurance EXCEPT

A. Marine insurance.
B. General liability insurance.
C. Workers compensation insurance.
D. Burglary and theft insurance.
Answer» A. Marine insurance.
34.

Insurance eliminates or decreases the uncertainty associated with occurrence of an event

A. Correct
B. Wrong
C. Partially correct C.
D. Totally misleading
Answer» C. Partially correct C.
35.

The insurance plays a role in the economic development of the country in following ways:

A. Release capital for new investments.
B. The job potential increases
C. Money collected is invested in infrastructure
D. All of the above
Answer» D. All of the above
36.

Insurance brokers are governed by

A. Sale of Goods Act
B. Agency Law
C. IRDA Act. 1999
D. Mercantile Law
Answer» C. IRDA Act. 1999
37.

A reinsurance of insurance refers to ________.

A. line.
B. retention.
C. retrocession.
D. cession.
Answer» C. retrocession.
38.

IRDA Act. 1999 defines insurance intermediary as one including also

A. Insurance broker
B. UTI Agent
C. Sarpanch
D. Medical Examiner
Answer» A. Insurance broker
39.

Insurance reduces the extent of financial loss connected with uncertain events

A. True
B. False
C. To the extent of insurance cover
D. Does not reduce the loss at all
Answer» C. To the extent of insurance cover
40.

The business of insurance is related to protection of

A. Savings
B. Status
C. Profits
D. Economic value of assets
Answer» D. Economic value of assets
41.

Which of the following is the similarity between insurance and gambling?

A. The amount of loss to be paid is known beforehand
B. Promise to pay on the happening of an event
C. Both the parties win on happening of an event
D. Both are enforceable at law
Answer» A. The amount of loss to be paid is known beforehand
42.

What is underwriting in Insurance ?

A. Process of investing the premiums which insurance provider collect from insured parties.
B. A claim arises on the occurrence of a specified event
C. Process by which insurers select the risks to insure and decide how much in premiums to charge for
D. The ratio of losses and expenses to premium
Answer» C. Process by which insurers select the risks to insure and decide how much in premiums to charge for
43.

Insurance Sector in India is regulated by IRDA. What is full name of IRDA?

A. Insurance Regulating and Development Agency
B. Insurance Rules and Development Authority
C. Insurance Rules and Deployment Authority
D. Insurance Regulatory and Development Authority
Answer» D. Insurance Regulatory and Development Authority
44.

When was IRDA Act passed?

A. 1972
B. 1999
C. 1989
D. 2000
Answer» A. 1972
45.

Which of the following is the main objective of IRDA:

A. To take care of the policy holder interest
B. To open the insurance sector for private sectors
C. To supervise the activities of intermediaries
D. All of above
Answer» A. To take care of the policy holder interest
46.

The general insurance business in India was nationalized in the year.

A. 1976
B. 1956
C. 1983
D. 1972
Answer» D. 1972
47.

The main role of an underwriter in a non-life insurance company is normally to

A. assess the acceptability of particular risks
B. certify a loss when claims are submitted.
C. design the structure of the products to be offered.
D. negotiate with the industry regulator.
Answer» A. assess the acceptability of particular risks
48.

Akshat is a relatively cautious person. In insurance terms, this will normally increase the likelihood that he will

A. be considered an above average insurance risk.
B. be considered a below average insurance risk.
C. require insurance cover.
D. require reinsurance cover.
Answer» C. require insurance cover.
49.

Which of the statements is correct? A. Insurance is a transfer of risk mechanism. B. Insurance gives physical protection to assets.

A. Statement A.
B. Statement B.
C. Both the statements.
D. Neither of the statements
Answer» A. Statement A.
50.

Transfer of rights and remedies of the insured to the insurer after indemnity has been effected is called __________.

A. Insurable interest.
B. Subrogation
C. Proximate clause.
D. Money back policy.
Answer» B. Subrogation
Chapter: Unit 3
51.

Which one of the following comes under miscellaneous insurance?

A. Marine Insurance
B. Motor Insurance
C. Fire Insurance
D. Group Insurance
Answer» B. Motor Insurance
52.

__________ policy matures on the assured death or on his attainment of a particular age whichever occurs earlier.

A. Endowment.
B. Money back.
C. Joint life
D. Single premium.
Answer» A. Endowment.
53.

On the death of the bread-earner, two losses occur in the family-one is loss of human life and the other

A. Earning power of family
B. Loss of insurance
C. Loss of investments
D. Loss of bank deposits
Answer» A. Earning power of family
54.

The principle of indemnity is applicable to _______ only.

A. Life Insurance
B. Personal accident insurance
C. Proximate Cause
D. Property insurance
Answer» D. Property insurance
55.

Insurance is based on the principle of _______.

A. co-operation.
B. Democracy
C. Equality
D. welfare
Answer» A. co-operation.
56.

______ are those terms, which are written on the policy.

A. Express Warranties
B. Implied Warranties
C. Memorandum Warranties
D. Valuation Clause
Answer» A. Express Warranties
57.

Which of the following statements is true: Under a fire policy

A. Insurance is a transfer of risk mechanism.
B. Insurance gives physical protection to the assets.
C. Statement A
D. Statement B
Answer» A. Insurance is a transfer of risk mechanism.
58.

Which of the following statements is correct?

A. One of the methods of risk retention is by way of voluntary excess or deductible available under the policy.
B. Another method of retention of risk is to absorb small losses as normal operating expenses of business.
C. Statement A
D. Statement B
Answer» C. Statement A
59.

Which of the following types of loss exposures are best met by the use of avoidance?

A. low-frequency, low-severity
B. low-frequency, high-severity
C. high-frequency, low-severity
D. high-frequency, high-severity
Answer» D. high-frequency, high-severity
60.

Consideration on the part of the life insured in respect of a life insurance contract is

A. A promise to take a new policy
B. The insured’s promise to pay the premium under the policy.
C. The payment made towards premium by the insured.
D. Proposal completed and signed by the person.
Answer» B. The insured’s promise to pay the premium under the policy.
61.

The policy holder’s duty to disclose material fact lies at the time of

A. Taking a policy
B. Revival of policy
C. Reinstatement of surrendered policy
D. All of the above
Answer» D. All of the above
62.

Which of the following is an evidence of insurance contract?

A. Policy of insurance
B. Payment of premium
C. Cover note
D. Acceptance of proposal
Answer» A. Policy of insurance
63.

Which of the following statements is correct?

A. People do not see the need for life insurance as top priority.
B. People hesitate to buy life insurance because they prefer to enjoy the present.
C. Both the statements are correct.
D. Both the statements are wrong.
Answer» C. Both the statements are correct.
64.

The principle of utmost good faith does not apply to :

A. Facts of common knowledge
B. Facts of Law
C. Facts which are not material for underwriting
D. All the three kinds of facts mentioned above.
Answer» D. All the three kinds of facts mentioned above.
65.

Which of the statement is correct? A. Existence of the subject-matter is an express condition. B. There are no implied conditions in insurance contracts

A. A. is correct
B. B. is correct
C. Neither is correct
D. Both the correct
Answer» C. Neither is correct
66.

The clause which sets out the essence of the contract is

A. The Preamble
B. Recital Clause
C. Conditions
D. Operative Clause
Answer» D. Operative Clause
67.

Endorsement can be used in a policy giving effect to

A. Renewal
B. Change in premium
C. Change in subject-matter of insurance
D. All of the above
Answer» D. All of the above
68.

Policy stamp needs to be affixed on the

A. Endorsement
B. Cover note
C. Policy
D. All of the above
Answer» C. Policy
69.

Cover note can be issued by

A. Agents
B. Development officers
C. Insurers
D. All of the above, depending on company guidelines
Answer» D. All of the above, depending on company guidelines
70.

What is the minimum age for a person to effect a contract of insurance?

A. 25 years
B. 18 years
C. 12 years
D. 20 years
Answer» B. 18 years
71.

Insurable Interest is defined by:

A. The Insurance Act
B. The Contracts Act
C. By IRDA
D. Not defined in any written law
Answer» D. Not defined in any written law
72.

Which of the following is true? A. Policy form is a legal document. B. The warranties inserted in a policy safeguard the interest of the insured.

A. A is True
B. B is True
C. Both are true
D. Neither is true
Answer» B. B is True
73.

In case of life insurance, insurable insurance should not exist?

A. At the inception of the policy.
B. At the time of a claim.
C. At the time of every renewal premium payment.
D. All the above occasions.
Answer» A. At the inception of the policy.
74.

Notification of Alterations in Risk is a condition

A. Precedent to liability
B. Subsequent to liability
C. Precedent to the contract
D. Subsequent to the contract
Answer» A. Precedent to liability
75.

A person’s insurable interest in his own life is:

A. Unlimited
B. Limited
C. 10 times the husband’s salary
D. None of the above
Answer» A. Unlimited
Chapter: Unit 4
76.

Occupation is important for risk classification because of:

A. Income earned by individual
B. Tension, stress and worries given by workplace
C. damage caused by pollution at work place
D. both b and c
Answer» D. both b and c
77.

A complete proposal form contains the information about

A. Moral hazard
B. Physical hazard
C. Personal history of proposer and identity of the property insurance
D. All of the above
Answer» B. Physical hazard
78.

Valuation in life insurance means

A. The process of arriving at the profit of a life insurance company
B. The process of determining the net premium for a life insurance policy
C. The process of arriving at the bonus in a life insurance company
D. The process by which the value of all the existing policies is ascertained in a life insurance company.
Answer» D. The process by which the value of all the existing policies is ascertained in a life insurance company.
79.

Endorsement can be used in a policy giving effect to

A. Renewal
B. Change in Premium
C. Change in subject matter of insurance
D. All of the above
Answer» D. All of the above
80.

Fire Insurance is based on the principle of ?

A. Utmost good faith
B. Insurable interest
C. Indemnity
D. Co-operation
Answer» C. Indemnity
81.

Which is the consequential loss in the fire insurance?

A. loss of profit on account of fire
B. property damaged by matter used for extinguishing fire
C. loss due to collapse of walls at the time of fire.
D. none
Answer» A. loss of profit on account of fire
82.

Fire insurance is a personal contract because

A. it is a contract of utmost good faith
B. it is a contract of insurable interest
C. the contract does not insure the safety of the property but only the insured from pecuniary loss due to fire
D. none
Answer» C. the contract does not insure the safety of the property but only the insured from pecuniary loss due to fire
83.

Which of the statements is correct? Under a fire policy A. Insurance is a transfer of risk mechanism. B. Insurance gives physical protection to assets.

A. Statement A. is correct
B. Statement B. is correct
C. Both are correct
D. Neither is correct
Answer» B. Statement B. is correct
84.

Which of the following is an accidental loss by fire?

A. loss of profit on account of fire
B. loss on account of delay
C. Damage caused by a fire brigade in carrying out its fire fighting operation.
D. Loss of market
Answer» B. loss on account of delay
85.

The major law governing marine insurance in India is

A. English Marine Insurance Act, 1906
B. Marine Insurance Act, 1963
C. IRDA Act, 1999
D. General Insurance Nationalisation Act, 1972
Answer» C. IRDA Act, 1999
86.

Can a marine policy be assigned?

A. Can be assigned before the loss
B. Can be assigned after the loss
C. cannot be assigned
D. both a and b
Answer» C. cannot be assigned
87.

Constructive total loss in marine insurance means

A. same as total loss
B. a partial loss
C. the loss caused is so huge that the cost of repairs would exceed the actual amount, so it is adjudged as a total loss
D. a loss which is not covered
Answer» A. same as total loss
88.

Group insurance is ideally suited for covering

A. Affluent persons in the society
B. Weaker sections of the society
C. Employer-employee groups
D. Both B. and C.
Answer» D. Both B. and C.
89.

Unemployment insurance is a component of

A. ESI Act
B. Social Security Act
C. Worker’s Compensation Act
D. None of the above
Answer» B. Social Security Act
90.

Which is the right time for taking life insurance?

A. When you are about to get married
B. Soon after you have got married
C. Just when you are joined a new job
D. All the three ‘times’ are right
Answer» D. All the three ‘times’ are right
91.

Which type of insurance protects the policyholder against loss or damage to a ship or its cargo on the high seas?

A. Hazards
B. Inland
C. Transportation
D. Mariney
Answer» D. Mariney
92.

Which of the following is not covered under General Insurance?

A. Theft insurance
B. Marine insurance
C. Life insurance
D. Fire insurance
Answer» C. Life insurance
93.

Which principle suggests that insured should try to minimize the loss of his property even if it is insured?

A. Principle of indemnity
B. Principle of Mitigation
C. Principle of Proximate Cause
D. Principle of contribution
Answer» B. Principle of Mitigation
94.

Group insurance is ideally suited for covering

A. Affluent persons in the society
B. Weaker sections of the society
C. Employer-employee groups
D. Both B. and C.
Answer» B. Weaker sections of the society
95.

Fire insurance can be taken in respect of __________

A. movable property only
B. immovable property only
C. both movable and immovable properties
D. persons only
Answer» C. both movable and immovable properties
96.

All of the following can be classified as casualty insurance Except____________.

A. marine insurance.
B. general liability insurance.
C. workers compensation insurance.
D. burglary and theft insurance.
Answer» A. marine insurance.
More MCQs
97.

________ is a social device for eliminating or reducing the loss of society from certain risk.

A. Premium
B. Policy
C. Insurance
D. Contract
Answer» C. Insurance
98.

Insurance provides security against ________

A. Risk
B. Losses
C. Both (a) & (b)
D. None of them
Answer» C. Both (a) & (b)
99.

The ________ is the party who agrees to compensate the other person against possible losses.

A. Insured
B. Insurer
C. Assured
D. None
Answer» B. Insurer
100.

The ________ is the party who gets his life or property insured against risks.

A. Insured
B. Insurer
C. Assurer
D. None
Answer» A. Insured
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